Polish firms feel slowdown pain as miracle fades

August 27, 2012|Reuters

* Companies say demand from EU customers down

* Poor outlook forces firms to delay investment

* Company CEO: It's a picture of stagnation

By Dagmara Leszkowicz and Marcin Goettig

DOBRA NADZIEJA, Poland, Aug 27 (Reuters) - The name of the town where Piotr Wysocki runs his saddle-making business translates as "Good Hope," a commodity that's in short supply since the economic slowdown ravaging the rest of Europe finally arrived in Poland.

Through a combination of European Union money, solid economic management and heavy public investment, Poland has managed to hang on to robust growth even when its neighbours were slumping into recession.

But a series of gloomy economic indicators show that the economic miracle, as some people call it, is coming to an end. Growth is slowing sharply and many economists believe things could get even worse.

Wysocki's saddle-making firm, Daw-Mag, sells 70 percent of what it manufactures to other European Union countries, making it particularly vulnerable to a downturn across the euro zone which has finally reached Germany, Polish exporters' key market.

He said clients from Britain and Denmark, among other countries, had cancelled their orders. The firm has tried to fill the gap by diversifying into other products, like leather upholstery.

"Because of the slowdown, we also had to suspend investments. We had planned to expand our manufacturing operation, but those plans need to be put aside for better times," said Wysocki.

INSULATED NO LONGER

By the standards of many of its shrinking euro zone neighbours, Poland's plight is not that bad.

However, for Poles - accustomed to 20 years of almost uninterrupted growth since they threw off Communism - the slowdown is difficult to swallow.

Across the biggest of the eastern economies to join the European Union in the past decade, people and businesses are feeling the pain from slowing growth: order books thinning out, customers delaying payment, and more people chasing fewer jobs.

Nearly 80 percent of Poland's exports go to the EU, where recession and a debt crisis have crippled demand for goods.

In the capital Warsaw, Rafal Nawloka, the chief executive of express delivery company DPD Polska, said his firm had registered double-digit annual rises in the number of deliveries it was handling over the past few years. This year, the increase will be in single digits.

Delivery firms are a useful barometer of the health of the economy since they have customers from every sector of business.

"This all gives a picture of stagnation," said Nawloka. "There are no factors on the horizon that could give the economy an impulse to grow."

BANKRUPT

Another firm in the sector is experiencing similar difficulties. "We are feeling a severe slowdown," said Arkadiusz Sienkiewicz, co-owner of express delivery broker Kurier Polska. "It is a tragedy. Firms are going bankrupt."

"We have half the numbers of orders that we did a year ago. Last year, many people were bringing in 10 to 15 orders a day. Now they bring one or two," he said.

Up to now, the Poles have been insulated from the euro zone slowdown by a massive programme of public investments, including new roads and stadia for the Euro 2012 soccer tournament, which it co-hosted with its neighbour Ukraine.

That spending is now tailing off, leaving a harsh economic reality that its European peers have already been living with for four years.

Still, many European entrepreneurs would envy Tomasz Urbanski because his firm, which lays carpets for commercial clients, is still growing. He said sales at the company, Coniveo, are expanding by 2 to 3 percent.

But that is a big drop on the 20-30 percent growth in sales the firm had been enjoying in previous years. "We are still growing but the difference is obviously huge," he said."

"This is another example that shows how things are: three years ago we needed to hire a receptionist. We received 300 CVs. A few months ago we had to hire a receptionist again. We received 900 CVs."